Inflation Clarity Doesn’t Mean the News Is Good
Disappointing labor data, spiking commodities prices and supply-chain headaches are scarier than Covid-19 for markets these days.
Going down? Yes and yes.
Photographer: Chris Ratcliffe/Bloomberg
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The U.S. bond market took a day off to celebrate Christopher Columbus and Native Indigenous Americans, which was probably just as well. By the end of last week, the bond market was showing clear signs of losing its nerve over inflation again. Moreover, this wasn’t a uniquely American phenomenon: German inflation breakevens, the implicit inflation forecast that can be derived from the bond market, are at their highest in eight years, even if they remain below 2%. In the U.S., forecasts for both the next five years and the five years after that are close to the highs they touched during the brief inflation scare this spring: